LONDON (Reuters) - The Bank of England made a shock 1.5 percentage point cut in interest rates yesterday to just 3 percent, their lowest level in more than half a century, as it seeks to prevent Britain from sliding into a deep recession.

That was the biggest official interest rate cut since the 1981 slump and completely wrong-footed analysts who had mostly been predicting a half-point reduction. Not one in 62 polled by Reuters had expected such a massive move.

The BoE said the economic outlook had got a lot worse and drastic action was now needed. Economists said more rate cuts would still follow and it was possible Britain could soon have rates the same level as in the United States — one percent.

"The MPC needs to keep cutting interest rates aggressively. I think that they will need to fall to one percent," said Roger Bootle, economic adviser to business advisers Deloitte.

"Rates have never before been this low, but extraordinary times require extraordinary action. And it is not impossible to imagine circumstances under which rates end up having to go lower, perhaps even to zero as they have done in Japan."

Two-year bond yields fell to a record low below 2.5 percent. The pound, already down about 20 percent this year, fell but then rose after the rate verdict, as investors bet the economy's growth prospects had improved.

The British economy shrank for the first time in 16 years in the third quarter and most economists expect further contraction through next year and only a small recovery in 2010, when Prime Minister Gordon Brown must call an election.

The Swiss National Bank and European Central Bank also cut interest rates yesterday as countries all around the globe try and cope with the fallout from the credit crisis that has felled some of the biggest financial institutions around the world.

Chancellor of the Exchequer Alistair Darling said it was essential banks did everything they could to pass the BoE's rate cut on in full, but Lloyds TSB was the only major lender to do so immediately after the BoE's decision.

Share prices for the top 100 British companies took little cheer from the news, falling more than five percent on the day in line with their European peers.

Home builders were the only sector to see lasting share price gains after the rate cuts, as both they and their customers borrow heavily. Initial strong share rises were not sustained by retailers and pub chains, which are also highly geared and rely on discretionary spending by consumers.

Jacqueline Penny, 42, a healthcare support worker in Glenrothes, Scotland, said: "The rate cut will help us mortgage-wise, but the money saved will go on the extra costs of fuel and food."

Yesterday's stunning BoE move follows a globally coordinated emergency rate cut of half a percentage point last month, meaning British rates have come down by nearly three percentage points since last December.